good morning. another leap toward dow 14,000. new the markets have to deal with adp, gdp, and today's fed meeting. as boeing prepares to roll out results, more details about when the arizoni aerospace giant kne problems for the dreamliner. and margins better than expect expected for blackberry.

it -- for amazon. it's wednesday, january 30, 2013. and "squawk box" begins right now. good morning, everybody. welcome to squaw"squawk box" he cnbc. today we have the four bs -- ben bernanke and the fomc holding their first meeting of 2013. investors watching carefully for any change in strategy to boost the economy. blackberry 10, research in motion is unveiling its latest and greatest device in hopes of saving the battered company. boeing, the dow component releasing quarterly results around 7:30 a.m. eastern time. we will have instant reaction and more on the dreamliner battery drama. and last but not least, the bulls going on another run. the dow jumping another 72 points to close just 46 points away from 14,000, just 210 points away from its all-time closing high. we have a big lineup covering the rally, the fed, and the economy this morning.

ed keon of quantitative management associates and dan greenhouse of btig will be serving up the markets for us. fed watchers will join us at 7:40 a.m. moody's chief economist, mark zanby will have the adp report at 8:15. former national bureau chief marty feld stein will wrap it up at 8:40 a.m. eastern time. a big lineup. andrew, over to you. >> thank you. the big news, the national transportation safety board is asking boeing for a full history of the lithium icon batteries used in the dreamliner jets. the ntsb made the request after learning of the incident that's occurred before the battery fire on japan's airlines jet back at boston's logan airport on january 7. al nippon says it replaced batteries on its 787 jets ten times after they failed to charge properly or showed other problems and told boeing about the swaps. and an ana flight was forced to

make an emergency landing on january 16. and phil lebeau and aviation expert michael boyd will join us. we'll be gearing up for boeing's quarterly results coming at 7:30 a.m. eastern time. a lot to get to. you see that story on the front page of "the new york times" and other places. the fact that they knew about it, it was a bigger problem makes me more anxious, but i know you think i'm anxious about planes -- >> no, i think at this point things -- people are starting to get concerned about what the issue is. they still haven't been able to identify it. that's a bigger problem. if you can find the problem and a it, you can get toward fixing it. and at this point, they're still looking around. >> hopefully when building a plane like that, as new as it is, i bet you could find data and concern about -- look at what's happening in the fusel e fuselage. wow, look -- i bet you find, you know, microanalyzing the whole plane. you can find things that look like concern that would just be the normal thing. >> flying the plane for millions of test miles already. >> knowing there is more to it

-- is that what you think? >> have they been grounded at this point? it's not the normal bugs. >> still, if you did it on percentage basis, it's within six sigma guidelines how often it's happened. there's been a lot of flights, hours logged. and it's been -- did sno-- >> no, with the number of hours logged, you would think you would find the issues. >> they did, and i think there was some -- you know, now there's whistleblowers, too. i saw the guy. he looked like a freak. he had a ponytail -- >> every whistle blower is a freak of some sort. >> and you never know -- >> and that's why they're whistle blowers. so -- >> well -- again, we'll talk to people. but i read the article on -- in the "journal" about, you know, what they're trying to do. they're looking at batteries that didn't charge. on the same flight versus the ones that did. and they're -- you know, they're looking at the chemical composition down to like the molecular level. and it just shows you they haven't found anything yet. circuit boards, they -- they

haven't got -- >> don't know what it is. >> two weeks already, they don't have a clear idea. >> that's the concerning part. in the meantime, flights are grounded and they can't deliver more of them to the carriers. >> yeah. all right. amazon meanwhile, we alluded to earlier, fourth quarter profits down 45% from the year ago. but amazon, that's not what you look at. higher revenues failed to keep up with what the company is doing. that's spending on new warehouses, digital content, new distribution centers. the results were below expectations. however, the first quarter outlook was shy of estimates. gross margins, that's what people are keen on. better than expected 24% in the quarter. possible sign that amazon starting to benefit from all of its investments and expansions. this is like deja vu all over again with amazon. you see this again and again where you can't -- can you imagine starting a company from scratch? the guy's still young, still got that vibrant laugh. >> a lot of ideas, too. >> yeah. starting from scratch, where you're going to buy anything you

want, name it, and i'm going to get it to you like right away. i'm going to have a place that will deliver it to you immediately -- i can't imagine -- >> trying to build places now with -- >> it's a daunting task to try to do that. and he's pulling it off. yeah. ceo jeff bezos laughing all the way to the bank as he always does. highlighting the strength of the kindle business, grew 70% last year. amazon shares jumped in late trading 22 points. >> look, over 8.5%. >> if i had a nickel for every time baron's said some was going to zero. yeah. >> what's the -- >> that's the price to earnings multiple. a comparison of the price where the stock is trading versus the earnings. >> yeah. >> divide the price and you can come up with -- >> such a smart aleck. >> showing -- >> thank you for the definition. >> somebody messed with the

computers. >> i said what is the actual -- >> what is the actual -- >> as opposed to the -- >> do you do snath. >> occasionally. but -- math? >> occasionally. but why don't we pick it up off the board. you will say to be clever -- >> not to be clever. we need to figure the p.e. out after this latest number because it was 45 -- below expectations, below last year. you're going to need to figure out a new one. i'll give you, you want this year's earnings, next year's, or trailing earnings? >> forward looking. >> basically, i'm looking it up -- >> forward looking. >> i'm not -- i don't know how they calculate it. it's 3,476. is that possible? >> all right. here's the deal. this is what you're dealing with with all the different things that go into amazon. 2010, they earned 253. 2011, $1.37. 2012, minus nine cents, a loss. 2013, $1.69.

2014, expected to earn almost $5. 2015, expected to earn $7.61. 2016, expected to earn $11.58. you tell me the numbers -- >> it's -- >> infinity and beyond -- >> or negative. >> i'm going with the minus number. >> going for the five -- >> no. i wouldn't probably -- i would probably put -- you look and what is the potential? you know, go between $1 -- they've earned $2.50 in the past. they're expected to earn $4 in 2014. go is so-- go with somewhere ar $3, $4. now it's trading -- >> $2.83. i thought it was -- my computer -- >> yeah, you're right. 2.60 plus 14. more than now, 2.80, 2.75. some growth that people are discounting looks like. the fed wraps up its policy ii-day policy meeting with the

latest policy statement due at 2:15. w watch for that. bernanke and the fomc expected to stay the course. a piece in the "journal" that was worrisome. i thought they were making huge dough on their holdings. and the "journal" piece says the fed could face big losses. and -- deferred paymentses to treasury. they can't always be on the right side of the trades. it will renew its pledge to keep levels at historic lows until it drops and maintains bond buying at 85 million a month. doesn't sound like much -- >> anymore. we've gotten -- >> those add up to a trillion a year, who's counting? there are new voter on t-- new voters on the panel. esther george, kansas city fed president, viewed as a hawk. she might dissent against further q.e. the boston dude, eric rosengrin, fed chief, has led the charge to keep it up for bond-buying

thresholds. why don't we check the market this morning. we told you yesterday the markets were up again. dow up by 72 points yesterday. in fact, at this point, the dow is 46 points away from 14,000. if and when it crosses back above 14,000, that would be the first time since october 17 of 2007. this morning, futures are fight higher once again. the dow looking like it would open by about 18.5 point from here. s&p futures up by 2.5. the nasdaq futures up by over 7.5. oil prices up another 33 cents. wow. oil continues to move higher. 97.90 for wti. that is going to impact prices at the pump. you wonder when that will pinch consumers. the yield on the ten-year note, 2.032%. we are above 2%. we've been talking about that because it's been a long time in coming. pack to april of last year -- back to april of last year since we've seen above 2%. you see that the dollar is down

against the you are, 1.35.56. dollar up against the yen, 91.32. gold up $4, 1,664, 90 cents an ounce. now to kelly evans on the global markets report from london. good morning. becky, good morning. i wanted to show what's happening across the euro stock 600. a generally quiet session. we're down .3% so far in trade this morning. that might have more to do with something happening here at the bottom of the index. the absolute dogs in the europe stock 600 this morning are the oil services. we can show you what's happening. look at the saipem shares once we get through the borses. saipem shares down in the range of 35%. this comes after they took a couple of hours to open this morning. let me show what's happening. 35% for this company. it's europe's biggest oil services provider by market cap. last night came out and warned about the profit outlook it's

seeing for 2013. now itself's looking at revenues -- sorry, of earnings of 750 million euro, down from 1.7 billion that the market was expected. this is based on review of contracts based mainly in the leaf, nigeria and -- the middle east, nigeria and algeria. order backlogs, more worry about that. delay of major contract. bottom line, this company comes out in barclay's, for example, calling it the fall of the king. this was a well-loved name among a lot of institutional investors. now they're completely changing their view. there's been a raft of down grades, a raft of cuts to price targets, and you see the response in shares today. that's been a major component weighing on trading generally. italy's biggest oil company is a big shareholder. would be hit on the news it's likely, but it doesn't help the fact that they have direct exposure. they're saying the news out of saipem last night will be a $100 million hit. the cfo saying a $200 million

hit for any shareholders. he expects a significant recovery in 2014. but those shares are down 4.5% today. the italian index is underperforming. was down about 1.5% the last time i checked. everything else is generally quiet. i want to mention, too, in earnings news, roche despite generally meeting forecasts, there are worries about its drug pipeline as are so many pharma companies. shares down 1.7% for that company. focus on that, as well. if there's a point to all this news this morning, it's maybe that we're not talking about the macro picture. yes, spain gdp came in disappointing. but you're not seeing the market react. it is a still micro-specific story. stocks seem as is the case with the u.s. to want to climb higher back to you. >> thank you. another piece of news. chesapeake energy co-founder and ceo aubrey mcclendon will be stepping down in april. the move caps off a tumultuous year for the second largest natural gas producer. last spring a series of reports

triggered civil and criminal investigations. regulators in chesapeake's board are looking into mcclendon crossed the line by mixing personal and company business and possible trauflt violatiant violations. shareholders stripped him of the chairman's title. the stock is moving higher on the news. actually, a lot higher. 10% higher. and kay kelly will have more details later. i should note, there was a report in reuters this morning that -- in terms of the compensation he's going to get out the door, it may be that the company doesn't owe him money but that he owes the company money. >> interesting. you never want to see a headline like this. when you're a ceo and lead -- "chesapeake shares soar as chief quits." >> it is up 10%. only $2 on a $20 stock. >> the strange part, he was the ghie made the company. there is a flip side to all of this. i'm not defending him. i'm saying -- >> i like the money that

jeffries got. >> what are you talking about? >> the money that handler got. >> yeah. handler did very well with the deal. richard handler. >> the market cap of jeffries -- i guess it's come back. >> a couple million bucks? >> yeah. i mean, he's making four times what blankfein -- $45 million. led the wall street to out of three years. >> say that loud and proud. >> say 45. that's got to get -- you've got to be irates about that, don't you? >> as a shareholder? >> no, as somebody who values fairness. driving buses for $48,000 a year. >> the world is not fair. i learn that every day. >> yeah. coming up, another b. the unveil of the blackberry 10. we're doing this for becky quick. then a daily double of stocks to watch. reactions to amazon's results, and a preview of facebook's results out after the close.

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welcome back. the u.s. equity futures are fight higher. dow futures up almost 15 after closing up 72 points yesterday. 13,954. 46 points away from 14,000. you see the green arrows still

helping things out this morning. let's get the national weather forecast this morning from the weather channel's danielle banks. good morning. we are definitely very, very active. as you can clearly see, new tornado watches that we have out and about. some are going to be expiring sooner than othersment we want everybody to know about the latest. we're going to pull further out see you can see the grand picture. and you can clearly see that we have watches which are going to be going in effect until even just after the lunchtime hour. some of these storms are moving through at a very good clip. you can clearly see that we have a brand new tornado warnings out moving south and east of louisville. certainly we have a lot of active weather going on. not just tornado warnings but severe thunderstorm warnings. and you see we're going to go to alabama. you see that many of them are occurring along major thoroughfares including interstate 65. here's a look at the big picture. i mean, it's a huge, huge line of thunderstorms. and certainly in its wake we had

a lot of significant weather which has led to flooding because of all of that water coming down in one place. and then of course on the back side of this, we're talking about the wintry weather. even stemming into the northeast today, we're going to be concerned about some icing out there. places in vermont, new hampshire, stemming up into maine. in terms of the severe weather aspects, again, damaging winds, gusty winds, as well as hail threats and isolated tornadoes. these are the areas that are under the gun. we want everybody to be extra cautious. back to you. >> okay. thanks for that report. it is -- did you see how foggy it was there this morning? >> it was. crazy. usually just up on the hilltop. this was everywhere. >> covered in fog. this could be a make or break moment today for research in motion. the company's going to be unveiling blackberry 10 smartphone at a news conference today at 10:00 a.m. eastern time. our own john ford will be covering the event live. he's going to join us in the 7:00 a.m. hour with analysts to talk about the big challenges facing r.i.m. the stock, of course, has rebounded over the last year. but it's seen better days.

big questions about whether this device is going to take off or not. there's a number of people around the table who at some level are rooting for this to work. >> didn't have a keyboard, did it? >> i thought the early one didn't. there's a new one -- >> one has a screen. one has a keyboard. i think we'll see both. >> you see the keyboard one, right? >> and both look promising. mixed results. you hear mixed things. if you play with it for a minute or two, it's fantastic. if -- >> that has to go on the year-end reel. play with it for a minute or two it's fantastic. that's got to go on -- can i -- >> this brought to you by andrew ross sorkin. >> some people have said that in t might have been early software. >> those who play with it -- after ten minutes, it gets boring finalli, right? andrew, do both of them have

brick breaker? >> that's a great question. i don't know. we'll talk to john ford about that at 7:00 a.m. >> 7:10. john ford. >> he'll have all of the answers about -- >> do you think we could get john to play with it on air? >> perhaps. >> i know you would. >> what time is it? >> my gosh. news on -- no news on anthony weiner, either, his intentions. >> amazon out with quarterly result. that hand after the bell with -- that happened after the bell with rising earnings mix. nobody seems to care. joining us is director and tech analyst at evergrow partners. >> thank you. >> i know you're -- you're slightly scared at this point. thank you for indulging us this morning. >> sure. >> your sense of earnings, they did miss. no one -- as i said, no one seems to care. >> i think you're looking through the revenues to look at really what is the gross profit potential. on that line, they beat and so i

think the -- when you step back and you look at the fact that much of their business is going from first party where they don't make a lot of money to third party, plus they have their web services business doing well, both businesses are high margin. i think investors take heart in that because the two things they care about most as tech investors is really competitive barrier and high gross margins. and i think as long as the overall growth story remains intact, seeing those gross margins is encouraging. >> what do you make of the tax issue which is starting to hit -- this is one of becky's big issues. she's been writing about about this -- how many years? >> the tax issue? >> the tax issue. >> the tax issue -- >> the -- the sales -- online sales tax. >> california and texas were hit this quarter. it could have played a role and probably did because u.s. revenues were lighter than international. i think for the most part there's a tradeoff. i think as they don't have to worry about violating the statute which is the no

presence. and when they go down the path of actually charging sales taxes, that does mean they can actually move closer to the consumers, build some of the fulfillment centers there and offer some of the amazon conveniences. >> and i think amazon is actually behind some sort of a compromise that would bring you revenue on a per state basis at least. >> right. it is going to affect the bottom line ultimately. >> it -- i think so. i think that there's a lot of areas in investment i think for amazon below the gross profit line. i think we focus a lot, investors focus a lot on that story. but i think when you think about the investments that they're doing on their web services side, all the dna that gets associated with that, that is -- you know, that contributes to the fact that they don't make money for a long time. >> you don't to look at the multiple. you heard us talking about that. what is the -- what would you use as an earnings per share number for amazon to base the multiple on? like -- a number to use just for illustration's sake. what's the number, $3? >> $3? well -- >> $4? >> in terms of what year, what

multiple? >> some people say $15 eventually. >> eventually, yes. i think eventually -- eventually when you're looking at the gross margins are likely to go up probably north of 30% over the next several years. that's going to be driven by the web services business, by third party. ultimately amazon just captures -- they're capturing straight margin on that. it drops in the bottom line. >> the multiple can reflect the growth rate. if it's growing at 30%, 35%, the average multiple would be 35 times earnings. >> right. at some point that investment that they worked their way through may pass. like they did in the 2006/2007 period around fulfillment centers and you see it spike. >> i want yours opinion on facebook. but the fulfillment centers they're building, good idea, bad idea, they spent $2.6 billion in last quarter alone. >> it's fulfillment centers and data centers around the web services business. i think both of those when you think about the competitive sort

of moat that amazon's trying to build are important. they hit the p&l near term, but i think longer term and the fact that they can stand to drive, you know, high margins on both software and retail services, then it does make a lot of sense. >> give us a preview of what you expect from facebook later. >> facebook, i think numbers for -- at least from an analyst's perspective are too low. it's a question of where the buy side is with investors. we're about 43% year on year. we think that's very achievable. about 1.6 billion in advertising. >> given what you're saying, if you're a fast money trader, you should be buying before the earnings release? >> i think estimates will have to come up certainly. i think after this result. it's just a question of i think where sentiment is shaking out. it's an easier comp as they cycle through the harder comps of last year when the business started to slow down. >> thank you very much. >> thank you very much. >> we'll see how that all pans out this afternoon. >> thanks. appreciate it. coming up, what could drive the dow to new heights? will it be the employment

report? on friday the adp employment report? will it be more positive earnings? we'll open up the discussion. and boeing's getting ready to report results. will the aerospace giant be able to get through the dreamliner battery turbulence? heading to break, a look at yesterday's winners and losers. this is america.

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good morning. welcome back. i'm joe kernen along with becky quick and andrew ross sorkin. in the headlines, federal reserve policymakers set to release their latest results today. you'll want to watch that. most analysts not expecting significant change in fed policy. but the comments will always be interesting. before the market open, we'll get the latest read on private sector employment from adp which too early to say, but i think it's been long. kind of been a little bit more -- jill cracken might be watching. not to disparage jill, but useful -- >> when they're coming around. been waiting for the two to converge a while, too. yeah. >> and zandy's in tight with -- may be getting advance. congress looking for 165,000 new private sector jobs for january. that was like 150 and been going

up because the claims number has been coming in on thursdays at five-year lows. was 215,000 that were added in december. also out, the first estimate of fourth quarter gdp if there was any. economist looking for an annual rate of 1% compared to the third quarter's 3.1%, what i was alluding to, how quickly it slowed down. it should go back up. fiscal cliffy. other stuff. >> call it fiscal cliff? >> fiscal cliffy. >> you have the consumer confidence numbers, they plunged. people trying to figure out, it's not only the fiscal cliff but the payroll taxes that kicked in. kevin ferry saying yesterday, maybe consumers getting hit by higher gas prices, too. combination of things. >> this guy, jeffriey handler, consumer confidence soaring. we were looking at that. i was trying to get people excite good this. jeffries has 3,800 workers. they had net income of $323 million. >> he takes 45. >> he got 45.

>> he got more than 10% of the net income. >> three-year restricted stock. jamie dimon got 11.5 million. 11.5 million. a quarter of that -- and instead of 3,800 employees they have 258,000 employees. instead of $32 3 million, it had income of $321 billion. and goldman, 32,000 employees, $7.5 billion in -- net income. and lloyd took home 21. >> your question, is he the most valuable person on wall street. >> in two out of three years, he's been the highest paid financial services guy at a medium level firm. but god bless him. see, i'm on his -- i'm always on the other side. you know, if you can get it, if it's in your contract, they owe you. >> but this is crony capitalism. >> his stock -- the stock is up, the stock is up 154% since he

took over in 2001 versus the s&p 500 up 14%. >> god bless him. >> turnaround right there. the dow closing in on 14,000. let's get outlook on what to expect today. from the fed and from the markets from our next guest, joining us from chicago, drw trading group strategist, and scott who -- the only thing we know is he'll wear the coat. we don't know how to say his name correctly. shellady. senior vice president -- i don't know how to say this either, treen? >> exactly right. yeah. >> good. lou, you can talk about stocks, bonds, currencies, what -- a lot of people are -- are looking at all a variety of those, even the bond market we're wondering, i see people recommending bonds, saying it's become consensus that rates are headed up. where are you? >> i think we're done with the low interest rate environment -- i don't think we're done with it

yet. i don't know how high the ten year will go. it touched 2%. can it go to 2.25? i don't know. i think that the low interest rate environment is not over for the long end of the market. i think that there's a possibility that we haven't even seen the low on the ten-year yield. you know -- >> what? >> a lot of stuff has to happen for that. >> nothing good. >> well, probably nothing good. no. i think we are reacting, you know, part of the -- one of the reasons that the market started it come down over the last few weeks was an interpretation of the minutes from the latest fed meeting that were taken as somewhat hawkish which i think was just a matter of a misinterpretation of the fed rather than the fed being hawkish. the fed in december did the most accommodative thing they have ever done. you know, they told us they'll be buying for some amount of time, $85 billion securities every month. and take the -- the balance sheet from the $2.9 trillion that it ended the year at, up, you know, annualized rate of an additional trillion. now the -- the key is the fed doesn't know how long that will

go. it's tied to the progress in the labor market. but you know, i don't think that that's stopping any time soon. i certainly don't think we see anything today that indicates an end point. >> okay. scott, you -- what do you want -- i was going to ask about cattle. that's the obvious thing. but i'd rather ask about the s&p or about -- the dow's almost 14,000. is it going to do it? >> i've been doing it for 25 years. i don't think i've ever been so conflicted in my life. what we have staring us in the face are new highs. i went back five years to the last time we were at these levels in the stock market. we had unemployment rate of under 5%. things looked a lot better. do we think that the economy is doing as well as it was five years ago today? not at all. >> before companies are making more money than five years ago. it's based on companies, not based on unemployment. >> and it's forward projecting. i get that. this is what i'd like to say. i think there's something in the room bigger than us, it's called the yesterday.

i can't tell my customers to close their eyes and buy with both hands. you have to get a seat when the moousk stops. -- the newscast stops. i agree that interest rates will grind lower. i think we'll have a slowly grinding higher stock market. we'll have a fundamental shift where we'll see the rates. we could see new lows in the ten year. i don't think things are that great in the you come at all. and that's the conundrum with why the stock market is doing as well as it is right now. >> so you and lou agree that we're getting close to -- to maybe not the top of the stock market but we're getting close to the highs in the yield on the ten year? you agree on that? >> well, i -- like i said, i don't know how high the yield is going here. i don't think that it's going very much higher. >> you're leaning toward, scott, you're leaning toward rates coming back down because of the fed. >> yes. look, the fed's telling you that they're pushing these risky assets. the equities and real estate. and as long as they're going to continue to do that, i think you'll see a stock market that people aren't afraid to own. there's going to be a built-in

bid underneath. in doing so, we'll see weak figures for the rest of the year. that's going to cause the ten year to have a difficult time getting over 2.25%. if thing come in worse than we expect, you could see it dip to the 1.5%. >> we decided earlier this week that numbers would be better this year because the government -- the gridlock in washington, these guys seem to have learned that it doesn't help anyone. and we're -- and europe seems to be quieting down. china's back. we decided the upside surprises in the half empty, half full debate that it was going to be positive things might surprise us, not negative. you are downers. big time. >> seeing mark faber said he think thing -- doug cass says we -- >> that was -- on drudge. it said faber says -- >> mark faber. and doug castle saying he thinks the markets at a high. >> i think david faber was

weighing in -- it was -- i thought he was getting the credit. scott, thank you. lou green. thank you. faber, not faber. how long did boeing know about the 787 battery problems? how will this impact the bottom line at the aerospace giant? aviation expert michael boyd will give us his review after this. and find "squawk box" on line and find us on mobile, too. follow us on twitter twitter, @squawkcnbc. like us on facebook and visit our show page, squawk.cnbc.com. [ wind howls ]

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welcome back. dow futures up 16.5 points. remember yesterday up 17 points. we're about 46 points away from dow 14,000. if we were to get there, it would be the first time since october of 2007 that the dow has seen levels like that. we'll keep an eye on it through the morning. take a look at shares of capano energy. being bought by kinder morgan energy partners a $3.2 billion deal. the transaction represents a 23.5% premium for capano shareholders over yesterday's close. plus, we're less than an hour away from boeing releasing its fourth quarter results. of course, there's more news that's being reported about what's happening with that 787 battery investigation, as well.

phil lebeau joins us with the details. phil, we keep hearing more about what's happening. this is some indication of what they knew and when. >> yeah. for the first time we're starting to hear that al nippon airways, the launch customer for the dreamliner, reported to boeing that it had problems with the lithium ion batteries in the dreamliners several times before the incident that we had on january 16 in japan. according to al nippon airways, they've had to replace ten batteries in the dreamliners between may and december. they reported some of those incidents because of power drops with the batteries or because they were undercharged. remember, the volatility of lithium ion batteries if they're undercharged or overcharged, and the gtsb, japan's transport safety board and ntsb have been notified about this. they'll look at the records about how often a&a had to replace the batteries and what happened -- ana had to replace the batteries and what hand.

perhaps the batteries have a failure rate that is greater than what you would expect to find or could be a source of problems. the ana spokesperson also told the reporter that the failure rate and replacement rate on these dreamliner batteries is no different than the batteries being replaced for the 777. that said, there will be questions on the boeing conference call today regarding the use of lithium ion batteries as they investigate what exactly went wrong with the two battery incidents and whether or not they should just scrap using lithium ion batteries. is it better to go with a nickel cadmium battery in the dreamliner which, of course, as we have talked about, is heavier. guys, i want to show this chart of boeing versus eads. the parent of airbus. if you look at these stocks over the last month, look at the split in performance there. up 20% for eads. boeing down, what, 1.5% over the last month. clearly under pressure due to questions about the dreamliner. the bottom line is this -- we've got boeing earnings coming out

within the next hour. and there's going to be questions on the conference call for ceo jim mcnerney regarding the batteries being used in the planes. guys? >> you lost me there. there's no difference in the failure rate between these batteries and which -- >> according to ana, the replacement rate is no different for what they've seen with the dreamliner batteries and they've had about 10,000 flights, ana did, versus when they've had to replace the nickel cadmium batteries in the 777. now we're not saying they're exactly the same. there's different batteries being used. what we're saying is that ana is saying the replacement rate is flow different between the 777 and the 787. having said that, the bottom line is this -- you have reports like this, there's a report out of the "seattle times" that boeing knows of at least 100 incidents where the batteries failed in these dreamliner batteries have failed. brings up the question of the reliability of these batteries. specifically with the issue of undercharging and overcharging

and the volatility involved there. >> thank you. let's bring in michael boyd, chairman of the body group. michael, when we -- the boyd group. michael, when we spoke last week, you were taking a wait-and-see attitude, marion barry thinking things weren't as -- maybe thinking things weren't as bad. what do you think now? >> it's bad. you're looking at a situation where you have a whole supply chain that's plugged up. stopped. so it's going to be something for boeing to have deal with to get the production line back running is going to cost money. but these liabilities, these financial liabilities are going to pile up on boeing not only from airlines but from suppliers that can't produce the lavatories, can't produce the wings and things like that. y i think something better happen soon or boeing is going to be in very difficult times. i think airlines are going to start to rethink what their order book is. >> what if they had to switch the nickel cadmium? what's the cost and how much better are lithium than nickel cadmium? >> the -- the camera i'm speaking into has a lithium ion

batte battery. cell phones have them. the question is, can the -- the nickel cadmium produce the same kind of juice to actuate the brakes and actuate what used to be hydraulics. maybe you can't do that easily. i'm not an engineer. but there's a significant difference between those two batteries and what they can do. >> if you can't replace -- if it comes down to where you decide you need do something other than a lithium, you can't do nickel cad me sum? you're not sure you can do it that way? >> i thought airbus was using nickel or using a different type of lithium. >> talking about the hydraulic systems. >> it's the application for the battery. you may not be able to do it easily. they had a couple of hundred pounds to the airplane. but the compartment that's in, maybe it won't take a nickel cadmium. any number of issues may come into play. may be the specific battery itself, not the technology it uses that may number question. >> haven't these planes been in the air for millions of flight miles? and how is it possible that they just figure this out now?

or is it possible actually that they knew that there were problems earlier? >> yeah. this is one of the things -- after something happens, you find out, hey, that airplane had this problem or that problem. the airplane had been flying around. we never had this before. the airplane doesn't have aerodynamics aerodynamics -- aerodynamic problems, structural problems. for the first time we have no idea how to fix this. the faa, like the john kerry, they were for it before they were against it. they don't know what they're looking at. that's the problem. >> you talking about the -- talking about the new secretary of state now, a little respect, please. >> sorry. >> what is is boeing insured, how is it insured for this? is there some sort of him for when they'll be -- for a while you can guess they'd be putting these losses that are incurred off to an insurance company. is there a time when that runs out? >> i would think so. there are all sorts of things. you have the airline liability. you have the supplier liability. you have -- even after the airplane starts to fly again,

you'll is airlines coming back and saying people are booking away. that's a further damage. people who want to fly the 787, a further damage. can't prove it, but even after the thing gets back in the sky, there's other liabilities that boeing is going to face. >> okay. michael, want to thank you very much for joining us this morning. phil, thank you. we'll see you coming up again in 45 minutes when we're expecting results from boeing. and phil's going to be all over that then, too. >> okay. coming up, the embattled ceo of chesapeake energy is leaving. so far, investors are cheering. what happened to co-founder aubrey mcclendon's handle on the natural gas giant, and what does carl icon have to say about the departure? details next. as we head to break, check out the price of natural gas. this is america. we don't let frequent heartburn

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chesapeake's co-founder is going to retire and that's catching some investors off balance. >> a surprise resolution to what's been an ongoing problem with chesapeake. they've been under investigation by the justice department, sec, irs, state of michigan. there's questions about their

spending, debt levels, aubrey mcclendon's related transactions, reportedly borrowed more than a billion dollars from a major investor in cheese peek. the board was almost totally shaken up, only about two more members remain out of the 12. it's much more investor focused. apparently they clashed with mcclendon and spending decisions he was having to seek their permission and something called an aubrey discount in the stock that was essentially trading at depressed levels -- >> you called that a pop. is that a temporary pop or real? >> when the ceo of 24 years fun toed the company, shaped it, responsible for its growth and success to a certain point leaves and you get an 11% rally premarket, that's significant. >> who will take the role? >> i don't know. i'm told they've hired an executive recruiting firm and

want a more mature company enp oil company ceo. they will look for somebody with industry experience, somebody that doesn't have that entreprene entrepreneurial streak, heavy spending, a lot of risk spending, they don't want that anymore. >> is that okay? do you want that at this stage of the game? >> i think that might be true. you're seeing a sea change in activism. you look at those who founded another firm and they're looking at major changes. we're seeing a lot of this. i think these companies may have no choice or managements may have no choice. >> what will aubrey mcclendon get paid or owe the company.

>> an interesting question. on a net basis how does it work out. he reportedly has a hand some exit package. >> what are the details? >> i don't have that. he may have to disclose some profits depending what these investigations uncover. he's still participating in this well program. he has a stake in every one of the company's wells and that over time will probably do very well. >> thank you for joining us this morning. appreciate it. coming up, the big four, keeping investors very busy this morning, bow morning, bowles, bernanke, boeing, blackberry, you name it, we have it covered on "squawk box." the layineup back in two minute. t exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to.

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in the line of sight, dow marching forced 14,000. could the economic data cool off the hot hand. we will talk about jobs and making the fed work for you. big news on boeing, what the company knew about the ion lithion batteries, plus quarterly results. and the release of the blackberry. is it enough to make it a true competitor to apple? we'll find out as the second hour of "squawk box" begins, right now. good morning. welcome to "squawk box."

i'm andrew ross sorkin with joe kernen and becky quick. after a quick breather, the rally on the street rolling on, just 46 points away from 14 thousand now only 210 points away from its all-time closing high. we have a couple of guest hosts who will talk more about that rally. first, other news, the national transportation board is asking boeing for a full history of the lithion ion batteries used on its 787 dreamliner jets. they made the request after recently learning battery replacements that occurred before the battery fire on japan airlines on january 7th. it said it replaced batteries 10 times after they failed to replace properly. boei boeing will be reporting earnings this hour and we will be looking at numbers and any

comments on the dreamliner situation. and phil lebeau will join us for reaction and latest on this story. it is important, the shares of blackberry are worth watching this morning as the company gets ready to unveil its latest smartphone, the blackberry 10. and that's coming up in a couple minutes. joe. andrew, amazon. you've seen it and we talked about it. fourth quarter profits fell 45% and higher revenue failed to keep up with digital content on new distribution centers. i've seen comments from analysts, they missed. look at the market. the marm will tell you what people thought about amazon. results below. first quarter outlook supposed to be shy of estimates. gross margins were 24% in the quarter, you can tell from the trading on the stock this is what people are keying off of surmising amazon is starting to benefit from all its investments and expansion. here is ceo jeff bbesos with

results. that's his reaction. and people that say, jeff, your numbers were below expectations. your revenue was below expectations. yeah. your outlook was below expectations. i hear you. look at that. 24 points. try to put a multiple on it, andrew. okay. i'm finished with you. i know you're happy. you have a lot of stock. i don't know how much you're worth now. consumer confidence is soaring. we treated figure out -- >> get handler doing that. >> that was a good question. wh what's the multiple. that's illustrative of what we're dealing with. we had to get the analyst who says i guess the earnings number is $15 a share when they're

posting $2. we're already discounting all this eventual growth, looking at 2015 possibilities for him. that's what you need to do when the stock is growing that fast. he also highlighted the strength of the kindle busy. that grew 70% and amazon shares sharply higher in the mid 280. i'm more interested now in the market cap for amazon. >> a good question. >> let me quickly figure it out. at $260, it's $120 billion. $118 billion. well above that. >> also, another stock that is higher this morning is che chesapeake energy company, the co-founder and ceo, aubrey mcclendon. he will be stepping down in april. this tops off a tumultuous year for the second largest national gas producer and there was a civil and other investigations

and looking whether he mixed personal and company business and possible anti-trust business. board holders took control back in june and stripped mcclendon as shareholder and that stock is up 11%, we will have details later in the program as well. markets gaining momentum as the dow nears the 14,000 mark. that comes out at 8:15 eastern time. dan is three chief global strategist and ed is a quantitative analyst. you've been telling us for some time the stock market would move higher. you've been 100% correct on this. we've seen big gains and people nervous thinking maybe this is time to take money off the table. you wouldn't advise that. >> corrections are a part of any market and bull markets. think of the great bull market

of '80s and '90s and included the crash of '87, a very scary time but '87 overall the market was still up at the end of the year. we're in a time the market will gain high digits on average with ups and downs along the way. it feels like we're ainu bull market and have been for a few years and i think it will continue for a while. >> this is a situation people watch the averages everyday at this point, okay, if there's a pullback, then i can jump in. they're getting nervous as things continue to climb feeling like they're missing the boat. >> that's part of the psychology of a bull market. people are not now looking to get out every time it ticks up, looking to get in every time it ticks down. that won't last forever. as long as the overall economics and fundamentals continue to grow, i think they will and we will gain traction the seconds half of this year, i think we will have a pretty good ride. >> you're talking multiple years still to come. >> correct.

not straight up but steady gains on average for the next couple of years. >> what do you think? you watch everything that's happened. a lot of concerns out there. we have moved a great deal quickly. >> with all respect to ed, the market is going up the next couple of years because in general it always does go up the next couple of years and no reason to believe this cycle would be different. my issue is in terms of government intervention and fed stimulus so on and so forth. very difficult to see three years down the road and think it will keep going up. at the same time, we have to unwind the stimulus applied to the economy and i don't think anybody knows how that will go. policymakers will tell you everything will be fine, a growth in the organic economy and the fed does what it needs to do and tools are in place and they are. for now, i don't disagree the bias is higher and generally the bias is generally always higher.

at some point, the dynamic will change. >> i agree. exactly right. my call is things will basically be about average. we've been so anti-average the last 10 years or so, that sounds like a new call. >> i don't know very many periods the market was higher three years later. that's been the wrong call. they haven't gone up for 12 years. >> you take a step back. i was talking to carl quintanilla on e-mail where the dow touches the highest in five years, i wrote to him, congratulations, if you bought five years ago, your return is now zero. you can go back to 1998, andrew and my age, we have never known a secular bull market. we have been in one secular bear. the question is over the next year or two do we turn lower, is this the '65 to '82 period? >> what's the answer?

we killed the monster for 20 years you could rely on, didn't have to worry, hold it long enough, buy ge and hold it enough you make more money. since g was 60 in 1998, it's 22. a lot of people aren't basing retirement on stocks and couldndon't trust it. that has to all turn before this is over. >> i also think relying on bonds for your retirement is a mistake. you need real growth. especially retiring at 60 years old or 60s, if you're going to live another 20 years, you need real growth and bead inflation by a certain margin every year and stocks have beaten inflation by 5 or 6 -- >> that was just an aberration? >> it's what markets do from time-to-time. >> if you had 100 bucks to put in the mark, you would or wait? >> i am putting it in. everyday as we get new flows, we're putting more money in the market. >> you're doing the same? >> i'm waiting for the spring.

>> what's happening in this spring? >> the sequester, next debt ceiling debate, a number of items that might send the market 10% lower. >> that's true but i have too much money to think about policy and not enough thinking about the fundamentals. >> 90% of hedge funds conform the market. the stock market was up 7% and the hedge funds averaging 8% or show. lot of that average performance came from worrying about these speed bumps. >> you can argue they were hedged. >> that might be. >> if you and andrew have never seen a period 800 on the dow, then 1200, then 3200, then 4200, then 6200, that was unbelievable to watch for 20 years. if you've never seen that, you have no input or experience on how that feels or work out, right? that would be a whole new dynamic -- >> i wasn't alive. >> i know. when that gets gone -- >> there's not enough research

to support that point, the way people experience things in 20s and 30s it's with them their whole lives. joe and i think the bull market is normal and you guys think they're abnormal. >> if you haven't been through that -- >> when i go meet with clients on the younger side of things, i am always fond to point out that in our lifetime we've never known that reagan i call it the volcker bull market, we've never known a period of sustained market. i'm sure it's wonderful -- the fact remains -- if you take a step back, over the last 100 years this happens from time-to-time. '65-'82, '82 to 2 thousand we move in these 15 to 18 year waves. we're in the middle of one now. >> a way long time. >> if you bout in '32 --

>> in '69, you didn't hit it until '82. >> the '69 was the "great depression" of the era. >> if you take 780 and do the 14,000, 14,000 divided by 780 and multiple that, you're up at -- >> you're not going believe this. whenever i'm at parties, i'm dividing 14,000 by 780. i do it all the time. >> good party. do you convince people? >> we drink if anybody can do it. >> you go home alone every night. >> my wife, she hates that. >> forgot about her. >> i would argue younger generations can be swayed and 55 on a sustained basis can do that. >> i saw they were replaying the sound bite that said the dow could get to 20,000 from 14 thousand people on air were going, well, we'll be checking back with tom on that! they're making it sound like he

should be committed. from 14,000 to 20,000 isn't even a 50% move. >> about 18 times. >> it's no different than kevin has s hasset saying the dow belongs at 36,000. >> yeah, yeah. that was the first time we got up in '98, wasn't it? >> yeah. >> we will continue this conversation. both these gentlemen are staying with us for the program. >> if you have the any questions or comments. if any out there is 140 and can go back and tell us what happened in 1914, that would be good. follow us on twitter our handle is @ @squawkboxcnbc. mine is either @"squawk" squa r or @squawk joe. am i? >> you're @joesquawk.

>> still to come, what did boeing know about the batteries and results from the dow component. and next, jon fortt is going to talk blackberry 10. jon! >> it's all going down. i will talk about what to expect and what they need to accomplish after the break.

welcome back, everybody. take a look at futures. dow futures are indicated higher at 20 1/2 points coming after a 72 point gain for the dow yesterday. that puts the dow within 46 points or so of 14,000 for the first time since october of 2007. as you can see, the futures this morning already indicating they are about halfway there. we will see what happens as we get closer to the trading day today. in the meantime we have numbers coming out. chrysler is reporting a first quarter froth of $248 million compared to the $225 million earlier and chrysler earned above what it earned in 2011. joe. >> thanks, becky. i don't want to read this. it says a make or break moment for rimm. i look at "usa today" that says, is this a kodak moment?

the company is ready to talk about the blackberry 10. jon fortt is with us. at one point we had tortsen hines on coming to us from waterloo in canada, talking about blackberry 10 and i was saying, waterloo, blackberry 10. these guys that follow if you say something about blackberry, they went crazy like there's some crackberry or something or other, that's a bad sign. i will let you know, everybody is saying it now, is it a kodak moment? make it or break it? what's your view? >> neither yet. this is a piece they need to put into place. they need strong hardware. they have a fan base that will jump on you if you say bad things about the blackberry. that's a good sign. let's talk about what they need to get done today and what we expect. two phones, one we suspects might be called the z-10,

touchscreen phone. rimm hasn't been a strong player there before and might unveil an x10, keyboard version, that you've come to expect to see from rimm. also the software, platform underlying it. blackberry hub and blackberry flow. you can get multiple tasks done very quickly. the software flows very nicely, i've seen it. it is impressive. take a look at rimm's rivals, apple, google, riding very high. google, microsoft and nokia trying to come on strong with google 8 and apple and google owning this space on the revenue and profit side in the phone business. here's what rimm needs to do today. this is the equivalent of an i-mac moment hopefully for rimm. apple in the late '90s got itself back on track and defined a space in the computing market,

didn't take it back over and defined who they were and set the path going forward. possibly what rimm needs to do is come out, show this hardware and set expectation s lower it will take a while. they said they will continue selling phones with the previous operating system quite a while and make up quite a bit of their base and this will take a while in volume and maybe set the barlower here. >> thank you for that. we are now joined by tim long, research analyst and editor-in-chief of boy genius report. since you are here on set, you played with this thing. >> i have. >> good, bad? >> it's great for existing blackberry users that love blackberry. >> not a ringing endorsement. >> i think pitted against the outside circle, a little more

complicated. you have to use it to see if you like it. they have done amazing things. this is the first blackberry they're doing without a physical keyboard. and many will buy it because it has a keyboard. >> there will be another with keyboard and touchscreen. i switched off blackberry a long time ago and i don't think i would switchback personally. >> tim, you heard it right there. if he's right, what does that mean to the stock? >> we do have an under-perform rating. we think blackberry 10 won't help change the success of the company. as jon alluded to, this is one part of the process. we're focusing more on the recurring revenue stream rimm has very profitable we think is -- >> you're writing blackberry 10 off as economic perspective and playing for cash? >> as of now the way the

econom economics work, the service business is a third of revenues and current devices they're selling are negative gross margin. this should help recover the hardware business but the real economics have been driven by the service revenue. we think it will ultimately fail. as you just said, it's a much better system to recent blackberries but we don't think it's enough to get android or other users to switch over. >> your view is there's no more revenu revenue. >> just what tim was saying, their system access fee, they share that revenue with rimm. they're no longer doing that because the new blackberry systems do not use rimm's operate i operating, they're not. there's no new revenue on service and only making revenue on hardware, exactly what tim is saying, no more blackberry

e-mail over the network. that whole day has gone, a major issue for rimm. >> i know both of you seem to be relatively critical. one of the features supposed to be attractive to corporate was the idea you could separate the work and corporate, sort of pieces of the device, that was going to be very attractive if you ran an it department at a big institution. if you are a big institution, do you upgrade your people or is it a slow train to nowhere, where people will move to androids and ios within the corporate sphere? >> there's a major issue there. if you have existing years on blackberry 7 or older blackberry, you need two blackberry enterprise servers to support blackberry 10 and 7, you need double the infrastructure. this has been done before. android with dual balance and it's been offered already. >> why is this not built into

the stock, it's already on a run here and what we're hearing this morning is not positive. >> people get excited about a product launch and questions how much do they support it. people will believe this has a chance. we'll have to see how the sell-through data comes in the next few month as it goes out in the market. >> thank you for your perspective. we will be watching the stock throughout the day and new product launch. >> there is no brick breaker. >> there is no brick breaker. >> shows you all the stuff you can play on an iphone and i'm still with the brick breaker. >> your bricker is palm, the first ever. when we come back, we do have a big number for boeing. will they keep investors grounded? we will get action from phil lebeau. we'll be right back.

time now for today's aflac trivia question. which two nfl players were involved in the san francisco 49ers play famously called "the catch"? the answer when cnbc "squawk box" continues. the win g and a . surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card at getwellduck.com.

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welcome back to "squawk box." i'm phil lebeau. fourth quarter earnings coming in above estimates, boeing reporting a profit of a buck 22 a share. revenues coming in as expected at $22.3 billion. the interesting part of this earnings report, the forecast for 2013, on the commercial airplane business the company says it expects to deliver between 635 and 645 airplanes including at least 60 787 dreamliners in 2013 with the question whether or not it will have to change its production schedule, boeing says it assuming no significant impact fromheurrent f araa directive.

in order, at this point they are not changing their production schedule, currently building five dream liners per month and planning to get to 10 by the end of this year and not changing the production schedule. they're basically stripping out pension costs volatile. when you look at core earnings, boeing is up 9% for the year and don't forget the conference call at 10:30. and the ceo and the first time we will hear from him and a sense of what's going on in terms of the dreamliner investigation. again, boeing reporting better than expected earnings compared to what the street expecting, a buck 28 per share compared to a buck 19. >> and looking for comments as to the dreamliner. a few comments for the first order of business in 2013 is resolve the issue and return safety to the customers. that looks like that's probably

all you will get out of this in this release. >> becky, i think we will not hear a lot on the conference call for two reasons. one, they don't know what's gone wrong with these batteries in question and some result, if they don't know, they will sit there and say, we don't know. we can't change the production scheduled an confident we will make 10 per month by year. five per month means you will deliver at least 60. if they keep that production schedule, they have to deliver far more than 60. those will be a number of questions on the conference call. i think at the end of the day, we're likely to hear the ceo say we're working on it and hoping to get things resolved as quickly as possible. that's about it. >> and the company's current 2013 financial guidance assumes no financial impact from that directive. we were trying to find out before from jim boyd, they have to have insurance and i don't

know when there's a limit and hits their bottom line. >> it impacts the suppliers as well. it's too fluid a situation to know exactly what that impact is at this point. they have factored in there were hiccup along the road. i don't think they factored in a grounding, not something they factored into their production schedules and plans for the dream heline dreamliner. at this point, we're in a period they have a little bit of time they can get things figured out and change the production schedule. at some point, you cannot have your suppliers roll out all the pieces and keep building them before you have to say, we have to put a halt to our production schedule or slow things down. we haven't hit that point. >> is there a plan b if we decide to not use the lithion battery. does that exist? >> i don't know if it exists. you have to think about this. you can't just take a battery

and put in a plane. you have to make sure of the variances of levels -- >> let's say it comes down to -- wow, we won't get to the type of stability that -- >> good question. in that we want. is there a bay toto -- way to retrofit it. it would cost a certain amount of money. is there a way to do it without a lithion battery and still have the 787? >> i guess it depends whether or not you're comfortable, you could find a different battery source. i don't have the answer to that, joe. i'm not sure boeing has the answer to that. it assumes they say we're not entirely sure the lithion battery will work. let's make a contingency plan. >> if you don't do it, you bet the farm. >> unless boeing says otherwise, i'm not a boeing analyst, i would guess you can't just swap

out the lithion battery and have everything fit. >> you would have to go through certification and testing again with a whole new battery system. you can't just put a different battery in and have the same weig weight. >> it must have been advanta advantageous with power and everything else. >> the power and weight and more in a smaller space. all those things go together. >> ilon musk, the founder of a company and knows a lot about batteries. he apparently wrote flight global, not one i follow, maybe you do, phil. he thinks they're fundamentally unsafe. >> i saw his comments. >> the architecture supplied to boeing is inherently unsafe, not enough space between them and

results in a domino effect and in time there will be more incidents. normally we wouldn't talk about a company outside the space. but he knows a lot about batteries. he said that for some time? >> he said for some time i'll be more than happy to share my information and thoughts with boeing. boeing will likely come back and say, thank you, mr. musk, we've been working on this some time, have our own team of engineers. i think there will be questions when all said and done about the amount of testing done with these lithion ion batteries. andrew brought up a good point, there have been more than a million miles with these batteries. why are we just seeing this now? w was there enough testing? at the end of the day, people will say, how come we're just hearing about this now? >> i want to know, we heard about the 10 battery swaps since

they've been in the air. when they were doing the testing, were they swapping the batteries out? will we find out later they were swapping for the past million miles? >> seattle times reports they have had more than 100 of these batteries fail at some point during development. the question is, what is that what is that rate of failure? we don't know at this point. is that higher than you were expecting? is that what caused the failures and all of this is what ntsb is looking in. >> stan greenhaus. is there a possibility there's something beyond the electronics? >> absolutely. they have not ruled out anything. you're looking at the worst situation for boeing they don't know exactly what the problem is and as long as they don't know exactly what the problem is, it's hard to forecast a solution, path for getting out of this. that is really the worst possible situation for boeing.

people would say it would be worse if it had catastrophic failures. i understand what you're saying. if you're a manufacturer, you want center artainty and you're getting certainty with understanding exactly what went wrong. >> wilike a car, it has a fire, you stop and jump out of a car. i feel better with a car with a lithion battery than 40,000 place. you don't want it either place. >> what does he use? >> he uses lithion. >> he says it's a different structure how they set it up. >> they say the 747 had huge growing pains. i wish we could look in the future and look back on this. >> don't forget, jim will be on the conference call and there

will be a lot of questions. former council of economic advisors marty feldstein will join us to discuss the fed. an interview you don't want to miss. you can watch, follow the handle and like us on facebook and visit our show page. a lot of new stuff an there. check it out. squawk.cnbc.com. all stations come over to mission a for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet...

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welcome back, everybody. take a look at the futures. nasdaq up by 7 1/2. we're keeping a close eye on shares of defense contractor northrop grumm mon. they reported a profit of two cents a share after stripping other items. $1.74. revenue is above consensus. the company says it's facing a challenge this year with the fed. >> former federal reserve vice president executive and nchief

economics reporter dapper sartorial and on the record today with an article in the paper. that's where i have to start with you, john. we're making money. i love when i see the fed report, they made another 10 trillion dollars, they gave it to the treasury, this is all we've got to do. your point is it's not always going to be they're on the right side of the ledger for some of these trades. how badly could it burn us down the road? >> the fed could go -- what happened, people at the fed are starting to get worried about this. a bunch of fed economists looked at that and said the fed could go four years or more without turning a penny over to the treasury because this huge portfolio of bonds they've got could turn sour down the road. they have to sell some and if they start raising interest rates or seeing inflation, their

costs will go up. all told, maybe a $40 billion hole in their pocket at some point later in this decade. the interesting thing is the fed likes to talk about the profits they're turning over the treasury now. when they talk about loss, they say this doesn't matter, you know, we're not in this business to be making money or losing money. it's all about monetary policy. >> they say they will take that into account when they're deciding what to do. >> that's what they say. >> there are two camps, i don't know who to believe. one camp, bernanke, who says we've done all this stuff. the minute i need to, i can get out of all this,no problemo. and others say this exit strategy, when you start, it will be very difficult to extract yourself. >> if only it were easy. >> we would do it all the time, right? >> we would have done this a long time ago.

this will be hard stuff getting out of this. on the profitability of the portfolio. let's keep this in context. the fed turns over 85, $90 billion in the past year. it reduced the deficit by that amount. we still had a deficit over a trillion dollars. if they have loss of 40 billion in the future at some point, if you assume the deficit is 800, 9900, a trillion dollars, not like it will add that much to the deficit. it is still huge. >> i think -- >> if interest rates go up, that means the economy is getting better. the fed will take loss but who will care if the economy is better. >> john. >> one of the reasons this matters is the fed is having a debate as we speak -- actually, they haven't gotten started yet. today, how long to keep these bond purchases going. what the analyst from researchers shows, the bigger the portfolio gets the longer they may go without profits.

most fed officials aren't too worried about this and becomes a factor saying they're weighing costs versus benefits. this is a potential cost, do we go other 100 billion, other $500 billion on these bond purchases? >> did you see some of the stuff david sent me taylor's summary of it but all the things you don't think about with fed policy at this point you don't know about the exit and inappropriate investments being made because we don't know where we are and banks carrying bad loans and 10 reasons why the fed is holding back. any truth? >> there must be some. the carrying costs of holding bad assets in banks' balance sheet are low. when the fed was 8, 9% in the late 1990s, if the fed had bad assets, your incentive was to

get rid of them as soon as possible. bring them down. now, you can hold them. >> zombies. >> this is a zombie problem. the fed strategy is push investors out the risk curve manned torture spectrum. great. the other alternative they might do is hold more money in cash and resist that. there is a tension there. the more they do this, the bigger the portfolio is, not just what does this mean for p & l, also mean when they need to get out, there will be a lot more assets to sell. >> harder to sell. >> if you're an insurance company, you will try to front run the fed, if you're a hedge fund, you will try to run the insurance companies. you could have -- it's a nastier process the bigger the portfolio gets. >> can i make one point specifically with regard to the john taylor article in our paper the other day. he and others are saying these fed policies aren't working, my

response to that is, hey, wait a second. look at home prices, look at the housing sector, look at auto sales. what's happening right now, the fed is looking at what's going on in the economy and saying, wait, our policies are starting to get traction. intrasensitive sectors -- >> the housing will come back some day no matter what. hard to tie one to the other. >> but rates are very low. this is a very train sensitive sector. there's tension here. the fed wants to see these policies having the effects we're seeing. >> will some hawks say we have to pull back today? will we see more of that continuing in the last couple of -- >> one of the people to watch today is ester george, the president of the kansas city fed. she's making interesting points about the risk to financial stability the fed might be creating. the question is does she descent at today's meeting? does she become a more

outstanding voice? >> ester. i've never known an ester, someone who has to be wise, born at a time -- >> the book of ester, look out for the book of ester. snow thanks. thank you for coming in this morning. coming up next, when it comes to the internet retail, it's a jungle out there. we will talk about amazon when we return, what happened to their earnings and what it all means when we come back. ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪

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amazon.com, missing on the top and bottom lines with its latest earnings report. that is true. but look at the stock. investors are looking at something that has nothing do with either one of those metrics. it may be profit margins or where the company is in a couple of years. let's find out. anthony, media analyst at barkleys number one, were you long on the stock before this? >> i was not. i want to help you with your pe calculation. i know you were working on that this morning. >> even though it's an art, not a science. the answer is it's trading at 254 times earnings. >> is it growing at 54%? >> it's not. you look at revenue growth, you look at a stage amazon was growing in the 30s and now 20s. it's growing at a more google-like pace. >> what about earnings per

share? is the pe two times its growth rate? >> mathematically, i don't think earnings per share growth makes sense because you're coming off a level that's like -- they reported earnings per share from 50 cents to -- >> with your fighting the tape and getting your butt kicked today. story tell you, you can talk all you want, it's up 22 points, right? >> you're right. we've been wrong because we thought investors cared more about revenue than margins. we're beginning to see the story is innein frequenting from revee growth to margins. i look at their guidance. the first quarter guidance was terrible margins, operating income being down and margins being a hit. i look at cap x they're spending on infrastructure that has to get amortized through the p & l

and in terms of aws, operating expense heavy business. i admit, we've been probably too cautious on the name. from a corporation valuation perspective it's tough to justify on earnings cash flow. to get to this price target you'd have to take 20 times next year's free cash flow and giving them credit for the working cash flow, which is debatable. >> you can compare all those valuation numbers, metrics to apple and apple would look like a buy on everything you just said and now it's 4 whatever. and i'm almost at the point where i'd almost just give them my money and say, talk to me in five years. he's almost got a jobs like reputation. >> so that's emotional capitulation. if you short the stock, you throw in the towel and saying, i'm never shorting the stock.

>> me saying that should give you a lot of confidence, anthony. >> well -- you know, it's one of those things i guess investors are looking at apple and seeing margin compression and looking at amazon and seeing margin expansion. as long as you have this halo effect around him and structural tailwind, it's really hard to bet against that. >> we had jeff actually listening to some of the things you've been say iing about amaz. we had him listening off-camera to a lot of your comments. >> okay. >> i don't know. does he have anything? where's la font? is he there? they got it? [ laughter ] >> what about what anthony said about the profit margins. [ applause ] >> i'm sorry, anthony. >> you're killing me. anthony says it's really

expensive at 225. what do you think, jeff? jeff? [ laughter ] we've done this 100 times. it never gets old. >> for you, too. >> see ya. >> when we come back, news that moves markets. just ahead. when we get those numbers nor mark zandi, we will talk jobs as we get ready for government jobs reports and we have professor marty feldstein, former chairman of the council of economic advisors and president emeritus of the nber.

bezos. dow component will report. >> earnings coming in above estimates. >> we'll dig through the results with an analyst that covers that stock as well as the industry. two big data points, how will the market react. >> dogs and cats living together! >> on friday's unemployment report, mark zandi will join us with the data.

>> you are in college. you have never work in the private sector. i have. i expect results. the third hour of "squawk box" begins right now! f xxx welcome back. dan greenhaus, chief strategist and cnbc contributor. >> four more letters. >> and quantitative manager associates, ed, you probably remember ed from toiling for decades at prudential. >> a decade. i'm still at prudential. prudential owns quantitative. >> all right. first, becky has your headline. >> boeing reporting profit of $1.28 a share for the fourth quarter. that's better than the street

was expecting, looking at $1.19. while that stock is indicated up about .8, the real questions are what's going on with the dreamliner and when they get resolutions to what's going on out there. at this point, the company is saying its guidance for 2013 does not include circuit impact that could come down the line involving that dreamliner. it also says at this point, it's maintaining production on the aircraft but there are questions the street still has. the dow is higher. boeing shares are up by about 60 cents. more with phil lebeau on this and two analysts. remember, we're watching u.s. equity futures. the dow up 70 points yesterday and with closing price just 46 points away of putting the dow back above 14 thousand would be the first time that happened since october of 2007.

this morning, the futures are indicated higher with dow futures up 12 1/2 points and s&p up by just over a point. overseas in asia overnight, the nikkei was up by about 2 and a quarter percent and the shanghai up as well. in europe, there are modest declines. dax down by 15 points and cac by 6 points and ftse by 3 1/2. and founder and co-founder aubrey mcclendon announced he will be stepping down in april. a series of reports triggered criminal investigations and looking into whether mcclendon crossed the line by mixing personal business and possible anti-trust violations. the shareholders took control in june stripping the chairman of his title and carl icahn took one of those slots.

another one we're following closely today, rimm, talking about the much hype d 10 smartphone. jon fortt is in new york. jon. >> andrew, four things we expect to hear about rimm. the operating system and the other, z 10, touchscreen phone, new designed, x 10, a keyboard phone. that probably won't launch until another four weeks and they have to have apps to back up operating system. look at the stock. it's really important rimm establish with this launch, they could have a shot with the smartphone market. talk about the app wars. it could be the app wars are actually over. apple and google so far ahead with the number of apps they've got. rimm probably needs to define a niche market and give

theirselves space in the future. and blackberry servers. somebody said you have to have two different versions running older phones versus new phones. that's really not the case. the new blackberry enterprise server can serve new iphones and android phones and they need that for them to be that niche going forward. we won't hear much about blackberry service revenue, an important piece of their company and as the number of subscribers comes down and good chance it will as long as they lose overall market share. they have multiple pieces to work on. this launch today is one piece of the puzzle for them going forward. >> thank you. we'll be watching this throughout the day. >> more now on boeing's fourth quarter report. phil lebeau joins us once again and joined by robert of credit

suisse and howard labelle of jeffries. phil, you want to go over the most important? >> this is one of those earnings reports, joe, the numbers are not really what people are paying attention to. they did beat the street at a buck 28 a share versus estimate of a buck 19. and revenue coming in as expected at $22.3 billion. let's be honest, what people are focused on wall street what is boeing saying about the dreamliner and this year, financial results what's going on with the grounding of the dreamliner. at this point, boeing is saying there is no expected financial impact regarding the faa directive and say productions schedule is not changing at this point building at least 60 dream liners this year. keep in mind, they'rethey're cu

at a pace of five per month and the schedule they laid out for wall street is 10 per month by the end of this year. what are the contingencies in terms of how long can this dream li liner grounding go before you have to change the production schedule. >> phil, you said no financial impact this year because of the grounding. there has to be significant impact down the road when these airlines have had these planes grounded so long and suppliers. >> great question. all we can go on is what they're saying in this release. no significant financial impact. >> they're saying that for this year, already over? >> they're saying that for guidance in 2013. what's significant to you. you have a huge company. at some point they can come back and change their guidance. what's clear with regard to the

dream liner, nothing is changing at this point. >> that brings me back to the point of how much insurance they have. there will definitely be loss that add up into the millions and millions. >> you're right. >> maybe there's an insurance issue. >> what's the impact in cash flow and in terms of recertification process, if that has to happen. all these things, the great unknown at this point. >> robert, from credit suisse, in the last three weeks, how has your assessment of this entire situation evolved? where are you now? >> i would say i've gotten some what more concerned given the lack of news. on the other hand, stated before as boeing said this morning, they can't comment directly on the investigation. they're limited what they can tell us while these vogueses are going on in japan. no news in this case is not necessarily good news. we'd like to hear more and that will dominate this morning's conference call with the

compan company. >> how long in your view is there some kind of resolution, robert. >> i think there's three different ways it can go. perhaps a modest rewiring and changing in procetocols and whi that process is evolving, perhaps the faa can get comfortableputting the aircraft in the air and the next stage redesigning of the battery. at the other extreme, something more in-depth with regard to the electrical system and something more important in that might halter slow production. the thing we need to focus on, you were talking about the costs earlier. until it causes production rate to slow or halt, we don't see much impact to suppliers or boeing. the cost of production and fix could be modest. bear in mind $100 billion in

cost to boeing is only 10 cents in after tax earnings. >> howard, your take on those three options and what's the most realistic outcome? >> i think the idea of redesigning the electrical system will not happen. boeing has been spending a lot of engineering hours to sort this problem out and closer to a solution we this far away will recognize. the cost is absorbed in reserves and introduction costs they already planned for in the course of the year. >> i don't know if you heard what becky was saying last hour, the ceo of tesla saying the batteries themselves may truly be faulty. how do you get away from that? >> it's quite possible. you look at the reliability data and probably not as good as one would like. reality is there's always things

on an airplane that can be improved. if this is what it amounts to, they circled on the problem and now can attack it. >> would you buy the stock right now. yes. absolutely. look at the balance sheet tod n $13.5 billion in cash and marketable securities. they can build planes at current rates without stressing their resources. what's interesting is a lot of the supply base has gone up to 7 a month without a hitch. >> robert, would you buy the stock? >> yes. >> phil, would you buy the stock? >> that's a question i'd like to answer. of course, you know i can't answer that. i find it interesting almost everybody i talked to on wall street our guests included brief it ultimately will be resolved and why the shares held up relative to the slew of bad news. >> i want it to be resolved and want beauing the be the gr-- wa

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let'sake a quick look at equity features, we have green arrows. the dow would open up higher and s&p 500 would ep open up slight more than a point. we do have steve liesman with regard to the number. >> the number is $192,000. they revised down the prior month from 215,000 to 185,000. this number for december is roughly in line here. you think about the non-farm payrolls, consent is 166,000. what you have to do is figure in some decline in government spending. i want to show you two charts. this is not inclusive of the most recent data. we want to compare the private sector to the adp report.

you can see it's been pret pretty -- there's the first screen with the data we're looking for, total private, december advising, you want to read it to me? >> you're looking for the total? down 198. >> the total miss so far over a 1 year period is $198,000. monthly average, $16.5,000 below. absolute difference, seven times adp was lower than the bls private sector. five times higher. no particular bias to answer for his economic data since. mark puts this together. tell us what 192,000 means about the job market and economy? >> not bad. i think job growth is accelerating. we've been using 150 k per mo h months an as our benchmark. feels like 175, moved up. i think that will be confirmed friday because we get the

benchmark revisions and that will be revised. >> put what happened with the adp report together with the other economic data, what happened to business in the whole debate over the debt ceiling? did they stop in their tracks? go ahead? seems like they were out there with these kind of numbers they didn't stop in their tracks. >> we don't know what the counter factual would be, might have been stronger growth. feels like they pulled back on investment. in the summer it declined a little bit. hiring, unemployment insurance claims come down, job growth about the same. all in all, i don't think they really responded. i think they couldn't really handicap the fiscal cliff but means to a lot of people didn't really change anything. >> the only thing anybody cares anymore as dan greenhouse said because they misunderstand the fed in our fed survey is the unemployment rate.

dan said in his response to our fed survey, basically people misunderstand the binary nature of it. it's kind of touchy feely kind of thing. what does 192 mean for the unemployment rate and the fact it will hit 6 1/2 next month. >> let's track ups and downs in the data. that should mean a slowly falling unemployment rate. actually with the bls benchmark provisions we probably have the unemployment rates slowly declining and that could suggest slowly declining, go by the presented lines the end of the year closing in on 7%. >> how tough is it to come to a number not even the end of the month yet. you have few days trickling in, getting the first friday of the month happens to be the first day of the month. does it make it more complicated?

>> it includes that week. doesn't matter, just when you do the cut off. >> there's a trim tabs numbers they have their own number 135,000 to 155,000 this is range they're looking at based on what they say is the analysis of daily income taxes to the u.s. treasury. have you heard of that? is there a good analysis? >> it's a good indicator. you look at that data, it's all over the map. it's pretty hard to glean information. a lot of noise. i look at it and use it. it's only one piece of information. you know what number i really like? >> what's that? >> adp report. >> the daily treasury data is so noisy. >> so hard, you'd think we'd be able to do it. >> i didn't even know they did that. >> trim tabs does it. not like they're way out, provide added information. there are times everything else is wacky and you look what trim is saying about the treasury data and helps you get to

reality. if there was a slam-dunk, we'd be paying them a lot of money. talk about the federal reserve and your outlook for quantitative easing. >> i think people are ov overanaly overanalyzing. knew said that. >> i'm reit raerating at the enf the day, people are doubting ben bernanke's seriousness of easing and irrespective of the fact he will not be the fed chairman an 2014. they're sticking to that 6 1/2 number at the end of the day, he's on his easing bicycle and nothing suggests he will stop. i think people really misread the info. this is the most important thing about misunderstanding the fed. we are knee-deep in the esoteric policy and there's a number of

moving parts here that are very difficult for most people. >> take the ecb, they're already tightening money policy. their balance sheet is shrinking and one reason the euro is rising. >> ironically the tightening of monetary policy is seen as a positive. >> let's segue knee-deep from esoteric policy to stocks something people care about and understand. when you look at job growth out there, i was thinking about the dow level at 14,000, there is something like 2 million fewer people in the labor force, something like 3.5 million fewer jobs. i do see that as a negligeative the current valuation or economic potential in the economy, these are people that can be brought back to work. >> i think it does. at the end of the day, the stock market is earnings. now, we're starting to get traction in the economy. the second half growth will be better than the first half and

by the end of this year, i think things will look better than today. also, earnings have been flash for the past few quarters and will get traction and even weakness in the dollar will help on the earnings front. nol valuation but earnings front. there is a lot of capacity of different taypes in the labor market and we will have a tremendous boost to earnings and that will power the stock market. >> this is super important. there is no relationship whatsoever between the economy's growth rates and stock market performance. you need to look at china. the economy is growing 7-8% and the stock market fell last year. no relationship. the gdp measures the economy's output and stock market is measuring productivity. >> short term relationship. >> the stock market is the leading indicator -- >> i'm not saying it's not a

leading indicator, the stock market can go down and vice-versa. >> i want to say for their record these guys segued into a rift of monetary policy without my prompting them. no, it was not. i don't want the blame for this, okay. no. >> i was going -- oh, god -- >> i did not -- >> look, they're trying to please you. they know you're sitting here. >> i'm not responsible for bringing them here. >> we should be talking about interest on reserves. >> we didn't get to tight ienin and- >> all right. it's always my fault. >> gentlemen, thank you. >> thanks, guys. >> dppd. more es oteric ca. >> like erotty ca, i know what you're thinking. >> we'll get to the first read on gdp at 8:30 looking at annual expansion rate of 3%.

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they're forecasting a loves 220 min the fiscal year that ends march 31th. that reverses an earlier forecast for profit of 2$220 milli million. coming up, the fourth quarter gdp, if you look at equity futures, we are 11.5 points for the dow opposed to a 72 point gain yesterday. we'll be right back. omnipotent of opportunity. you know how to mix business... with business. and you...rent from national. because only national lets you choose any car in the aisle. and go. you can even take a full-size or above. and still pay the mid-size price. i could get used to this. [ male announcer ] yes, you could business pro. yes, you could. go national. go like a pro. [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪

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welcome back to "squawk box," everybody. we are a few seconds away from the gdp number. wave been waiting for this. steve and mark are on the set with us. mark, why don't you give us those gdp numbers? >> gdp for the first quarter is negative one tenth of 1%, minus minus,.1. a bit of a surprise, the first time we had a negative quarter since december of '09, when it was exactly the same, minus point one. pretty shocking, consumption, 2.2, better than the last look at 1.6, at par with expectati

expectations. the price index, we ex-educate ex-educate -- expected up.6. you look at the personal consumption expenditure quarter over quarter, up .9 as expected. price index takes a pretty big drop. consumption numbers predictably higher, much higher compared to our last look. the headline number. look at it this way, we're down 30 on the dow today, up a significant amount on the month, on the year. and that's pursuant to your discussion, how you can have an up or down stock market. is that really reflecting what's going on in the economy? i'm sure many will be debating this. back to you. >> this is unbelievable. i'm sorry. >> yes.

>> there is a nuance on the report. >> more than nuance. it is up 15% on federal spending, double what people expected. off at 9.5. what happened as joe has conspiretized, you had huge rise in federal spending before the election. >> come on. >> a whole percent and a half from it. >> percent and a quarter. i'm sorry. >> the stuff that matters. i was going to say another word. the stuff that matters did best. consumer spending up 2.2 versus 1.6. business spending up 1.4 versus negative. can we look at the furrow on mark's brow, what the heck is going there. i was going to say another word. everybody thought busy investment was crashing,

structures down 1.1, equipment and software up 12.4%. this was the quarter when cap ex was going to crash. >> sandy was involved with that, closed down saying some of the -- >> good, becky. >> some factory production and layoffs in the weeks after the end of october. >> exports down 5.57. >> let me add quickly between the change in private anniversary and government spending subtract -- >> say that slowly one more time. >> the change in inventory, a percent in a quarter and change in spending subtracted 1.3. >> if i was rick santelli, i'd walk off the stage i'm so angry. if i were rick. just outrageous. >> when you see zandi ferro his

brow. you know what's coming? 800 billion ids new stimulus. >> all the gdps before positive, those are the ones more accurate. if there's a silver lining in this number, buying growth, buying growth is not a good way to go because eventually you end up getting the bill. it's called an iou! >> rick, deal with this one fact -- >> put this one into gold. >> i'm not spinning nothing into gold. the things that matter most in the economy, business spending and consumer spending both got better compared to the fourth quarter. >> why don't we just have those numbers and not have gdp then, steve! >> you can look at anything you want. >> i'm looking at gdp. >> one of the brightest guys in chicago, you are free, rick. >> how many people are looking for a recession? that's why surveys don't mean anything. >> folks at home can play this

game. >> you want to see the reality. this reality the economy is growing between 2 and 2.5% what it's been growing since the recovery started 3 1/2 years ago. >> minus.wouldn't .1. >> gdp minus.1. final sales, underlying growth in the economy, consumer spending, business investment, housing is growing, 2, 2.5%. >> what happened? >> this is shocking. we were looking for lousy growth. >> there is a boost in inventory in second and 30 quarter because of slow down in manufacturing. inventories built and got rid of them in the fourth quarter which agars very well going into qe1. >> the second half of the year was terrible.

>> year-over-year, 2 to 2.5%. nothing has changed. >> i assure you this number will be revised very soon. >> there are two estimates here. >> is it tied to the election? >> no, not at all tied to the election. >> let me make this one point. inventories and trade are estimated numbers from the final month of the quarter. this is something they estimated. what is this tolerance they come back a normal revision of gdp at a half a point? >> that's right. >> this will be much larger. >> because what -- you don't think those things really happened? >> no. >> let's underline the government cannot count the government. the deposit cannot figure out government spending. >> it might be related to the

sequester because government agencies may already be preparing. >> defense spending in the third quarter -- >> to buy the election. >> to buy the election. >> let me make a quick point. the big debate is what happens now and any austerity to sequestration. we already expect bad growth in the first half of next ye year -- first half of this year. if the sequester takes place, the effects on the economy are greateral al lal l alla what's europe, it will be bad this year. >> sequester. >> stop with the esso toterices. >> joe, when you act like europe you get growth rates like europe and our discussion with economists sounds like we're in

europe, the same discussions constantly, always doing the right thing, always thinking they know better. this is the kind of growth -- we have become europe. we are not europe. >> federal spending is 15%, rick, which part of not like europe do you not get. >> we need to reduce government spending. >> it was high in the recession. >> we run trillion dollar deficits for crying out loud! >> mark, steve, thank you all! >> it's now billion dollars. >> don't convince mark zandy -- >> that's what i'm worried about. >> the 8$800 billion, we're goo, on track. >> i can't reach anybody in the administration on the phone. >> 8$800 billion can take the form of tax cuts. >> austerity in europe is never austerity, tax hikes. coming up, a drop in gdp in

the fourth quarter, that's weird. the first gdp decline since 2009. we have marty feldstein to weigh in. he will join us next. a harvard professor and chairman of president reagan's council of economic advisors. where is he when we need him. futures at this hour indicated now --

welcome back, everybody. the federal reserve putting the finishing touches on a two-day meeting this afternoon with a discussion on interest rates. earlier we talked to someone from the "wall street journal" and said the interest rates is why this could be working. >> look at the home sector, auto sales. what's happening the fed is looking at what's going on in the economy and saying, wait, our policy is starting to get traction. intrasensitive sectors are kicking in. >> our next guest may disagree. marty feldstein is a professor mer mer -- emeritus. and why is the fed actually

holding back the economy at this point. what is your thought on all of this? >> i think the fed is actually helping the housing sector. i'm not sure that is such a good thing. we have had a housing boom and bust in the past and drove us into the recession in 2007. i'm afraid the house prices could depend on these extremely low mortgage rates which will turn around when the fed stops its quantitative easing policy. >> that's fair concern. we did speak to someone who said we're looking at higher prices across the board but aren't real buyers, investors jumping in and all have a way of changing the valuation and distorting thing. the question is when does the fed step out and what happens to the valuations when they do? >> at some point, the fed has to

stop changing long term interest rates. they say that's the strategy. if we take long term bond rates to anything like a normal number. right now you have negative 10 year yield rates. we take that back to a normal number, that means higher bond interest rates, higher mortgage interest rates, pressure on the stock market and pressure on house prices. this could be a false bounceback in house prices. >> there has been expectation, maybe the fed could withdraw i n an orderly fashion and shrink that balance sheet. is there a reason to be skeptical about that? >> orderly is fine but it still has to mean higher interest rates. once the market begins to focus on the fact loan rates are going back up, we're looking at a 4 or 5% 10 year treasury instead of a 2% 10 year treasury, that will have an important impact on

mortgage rates and on house prices and the prices of other intrasensitive assets. >> when the fed was first reacting to the financial crisis, most people said this was exactly what they should be doing, when did you think it was too much? >> i certainly thought that what they did in 2008, when the financial sector was essentially disfunctional, banks wouldn't lend to each other, total drawing up of credit, i thought the fed did the right thing. when they started the quantitative easing, that was probably a good thing. after a while, the risks out-weigh whatever the benefits are. clearly, as we saw with today's gdp number, pushing up housing, although it's fine for home building, creates some jobs, is not enough to get the economy movin moving. >> professor, you previously argued qe-2 was an important driver of stock prices and

ultimately economic performance in the fourth quarter of 2010. assuming that relationship still holds, that is to say quantitative easing can drive stock prices higher. why wouldn't what the fed is doing now be as good for the economy as we thought qe-2 would have been? >> in the beginning they were able to get an artificial lift to the stock market or if you want to be more optimistic, say the stock market was undervalue an get it to a more level for the stock market but you can't keep it up by keeping interest rates down especially as the market asks, what will happen next? aren't we going to see an exit at some point in which interest rates have to rise? >> when's that happen? >> i'm not sure when it's going to happen. could be 2014, could be 2015.

of course, everybody is super smart, everybody knows they'll get out before it happens. that's what they said in 2006 and 2007. turns out when the market goes, it goes very fast. >> if the fed is able to unwind things and start to raise rates or at least get out of the balance sheet because the economy is significantly improving, would that be enough to calm some of the fears of investors and not have those kinds of crashes, especially when it comes to stocks? >> well, what worries me is the possibility inflationary pressures could build up when the economy is still looking at high levels of unemployment. with almost half the unemployed out for six months or longer, a large number of people on temporary layoff, with lots of people who have part-time jobs even though they'd like to work

full-time it will be a challenge for the fed to raise interest rates in a timely way. i think that could lead to inflationary pressures which would contribute to higher long term rates simply out of expectations of inflation. >> down a tenths of a percent. if you were still running the nbr, would you call it at recession yet? >> no. the nbr is very careful when it times recession peaks. remember, it's got be sustained and deep. so we never call a peak until six months after that date. it can't just be a couple of months of negative numbers, it has to be something where it's -- >> what would call the last four years? you have a name for it? >> very weak growth, very very weak growth.

i mean, i've been saying this past year, we're going to be lucky if we get to 2% real gdp growth. a lot of people talking about numbers 3, 3 plus in 2012. now, at least we have official numbers for all four quarters and we're far short of 2%. we're far short of 2% for final sales. and the consumer is still keeping up consumer spending by a relatively low level of savs.s now, the consumer will get hit with higher payroll taxes and hard to see how consumption will continue to strengthen the economy in 2013. >> professor feldstein, thank you very much for joining us this morning. >> good to be with you. i hope more optimistically next time. >> we hope so, too.

coming up, dow component boeing reported better than expected fourth quarter profits. next, we talk boeing and other stocks on the move with jim cramer. later, blackberry ceo, thorsteh heins will be joining us to talk about blackberry 10 and its big launch

welcome back to tlt. let's get down to the new york stock exchange. i saw drudge and faber said enjoy the rally. i just assumed. but it's some other guy. >> yeah, some other guy. >> michael faber? >> oh, yeah, from homeland. >> hey, you guys, jim, i just was talking, i think the consensus, and david, i think it's 2.5 for 2013. i think the market is saying 2 1/2. i think everybody's saying 2 to 3, maybe hoping for 3. >> davos was saying 3. >> if it's 1 to 2, and i'm not saying it is, but if it were, if it really did come at 1 to 2, that's a huge disappointment. >> that's a problem. >> it's going to be 3. >> i don't believe this thing. all right. so you're with me on the

consensus? >> yes, i am. that's what many of the companies in the conference call are using. i'm using it. don't forget, the euro 135. these are bullish things for our country. >> this will probably be revised, you figure, jim. >> it's one off. i don't want to take action on it. >> jim, what do you do about boeing this morning? >> it's not an earnings play. it's a play on when the battery will be fixed. the company is making for tups. i don't want to touch it until i know there's a solution. otherwise this is the last good quarter. >> what do you know about blackberry this morning? >> look, you know, we don't like apple any more in the market and apple is killing r.i.m. we don't trade samsung. samsung's killing r.i.m. who's not killing r.i.m. nokia? >> we had an analyst saying all

the things that were bad about amazon and how this is ahead. every time he said something bad, i played that -- >> i saw it. i saw it. i know. >> he looked over at the monitor, i think he thought jeff was listening for a minute. >> he was also thinking, oh, man, now i won't be able to talk to bassos anymore. >> that was a great interview. >> it never gets old, i will admit it. it never gets old. >> i'm glad we saved that. >> how about showing being completely wrong, not helping anyone. really making it impossible on amazon. he still comes on. that's my kind of guy. >> but jim, i said the metrics for apple at 700, every valuation number was cheap. whereas everyone for amazon here is expensive. yet look, you know, the market seems to know more than this. >> how about the guy putting on about a 50 p, where did he come on that? pin the tail on the pe?

>> come up with whatever you want. >> there is no pe. >> keep the dream alive. >> yes. >> that's the beauty of it. >> faber, i want you to go into permanent icahn mode. >> i'm not there yet. i have to actually speak with him directly. >> talking about that analyst, what you would say about a moron. >> like down on the schoolyard. >> thanks, guys. coming up, we're going to get to our guest hosts, and get the last word from both of them on the markets and some other issues when we return right after this. tomorrow on "squawk box," we have a big lineup for the final trading day of january. the former chairman and ceo of chrysler. plus, live interviews with the ceos of fedex, dow chemical, other nation. [ man ] i've been out there most of my life.

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